Cooperative Finance H1 Net Profit Decreases by 402.7 Billion KRW... Delinquency Rate Surges to 2.8%

Expansion of Deficit in Economic Business Sector...Net Profit Decrease
Delinquency Rate at 2.8% as of End of June
Up 1.28 Percentage Points Compared to End of Last Year

In the first half of this year, the net income of mutual finance sectors such as Credit Unions, Nonghyup, Suhyup, and the Korea Forest Service Cooperative amounted to 2.0186 trillion KRW, a decrease of 402.7 billion KRW (16.6%) compared to the same period last year. The delinquency rate of the mutual finance sector recorded a significant increase to 2.8% compared to the end of the previous period.

According to the '2023 First Half Mutual Finance Cooperative Business Performance (Provisional)' released by the Financial Supervisory Service on the 4th, the net profit of the credit business (financial) sector in mutual finance was 3.7657 trillion KRW, an increase of 487.9 billion KRW compared to the same period last year. However, the overall net income decreased due to the expansion of deficits in the economic business sector. The deficit in the economic business sector increased from 856.5 billion KRW last year to 1.7471 trillion KRW in the first half of this year.

The total assets of the mutual finance sector reached 717.1 trillion KRW, an increase of 29.2 trillion KRW (4.2%) compared to the end of last year (687.9 trillion KRW). This includes the total assets of 2,211 cooperatives: Nonghyup (1,111), Credit Unions (870), Korea Forest Service Cooperative (140), and Suhyup (90). The average assets per cooperative were approximately 324.3 billion KRW, an increase of 13.4 billion KRW (4.3%) compared to the end of last year.

Total deposits amounted to 612.8 trillion KRW, an increase of 24.3 trillion KRW (4.1%) compared to the end of last year (588.5 trillion KRW).

As of the end of June, the delinquency rate of the mutual finance sector was 2.8%, up 1.28 percentage points from 1.52% at the end of last year. The delinquency rate for household loans was 1.43%, up 0.52 percentage points from the end of the previous year, while the delinquency rate for corporate loans rose sharply by 1.98 percentage points to 4.21% compared to the end of last year.

The ratio of non-performing loans classified as fixed or below in the mutual finance sector was 2.91% as of the end of June, up 1.07 percentage points from 1.84% at the end of last year. This was mainly due to a significant increase in the ratio of non-performing loans secured by real estate among corporate loans.

Regarding this, the Financial Supervisory Service explained, "Although the delinquency rate increased compared to the end of last year, the rate of increase has slowed since the second quarter of this year due to active management of delinquent loans." They added, "The loss absorption capacity is at a sufficient level, and liquidity management capacity is also good, with a significant increase in deposits."

They further stated, "We plan to encourage mutual finance cooperatives to thoroughly manage asset soundness through the sale and disposal of non-performing loans and the activation of debt adjustment systems, while also promoting additional provisioning for loan losses to enhance loss absorption capacity."

Financial Supervisory Service, Yeouido, Seoul. Photo by Jinhyung Kang aymsdream@

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